BTC

ETH

S&P Futures 500

$25,448.00

$1,659.25

$4,418.75

(-2.02%)

 (-4.82%)

(+1.15%)

Note: All percentages shown above are referenced to the previous business work day's 09:00 (GMT+8)

GM Treehouser 🌳

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May 2023 Market Recap

Our Daily View

What We Are Covering Today

  • ECB surprised the market by further raising interest rates, contrasts to the Fed’s decision earlier this week (more in Macro & TradFi)
  • Blackrock’s iShares files for spot Bitcoin ETF; Tether CTO dismissed USDT depeg as FUD (more in DeFi & CeFi)
  • Insights from Curve’s on-chain liquidity and deeply negative funding rates (more in On-Chain)
  • Implied volatilities on BTC pushes higher while it stagnates on ETH; Put skew on ETH eased while steepened for BTC (more in Crypto Derivatives)
  • BTC and ETH show bearish signs, with BTC breaking a descending triangle pattern and ETH breaching key support levels. (more in Crypto Technical Analysis)

Macro & TradFi

The European Central Bank (ECB) surprised markets by raising interest rates by a quarter percentage point, signaling its intention to continue raising rates unless economic data change significantly. This contrasts with the Federal Reserve's decision to keep rates steady. The ECB's assertiveness caused the euro to surge, while the Stoxx Europe 600 index fell 0.1%. The central banks' policies are diverging as they fine-tune their approaches based on varying economic growth rates and inflation dynamics.

In other news, ByteDance's TikTok is planning to invest billions of dollars in Southeast Asia in the next few years, aiming to strengthen its presence in the region. The company's CEO, Shou Zi Chew, highlighted the opportunity Southeast Asia presents and emphasized the company's intention to invest proportionately. TikTok's focus on markets like Indonesia is driven by its e-commerce arm, which has seen significant growth, surpassing billions of dollars in gross merchandise value. TikTok aims to expand its global e-commerce business and quadruple merchandise sales to $20 billion this year, challenging competitors like Amazon and Shopee. Despite the lack of traction for live shopping in the US and Europe, TikTok is drawing on the success of its Chinese counterpart, Douyin, in projecting its e-commerce potential.

U.S. stocks rallied on Thursday, with the S&P 500 gaining 1.2% and marking its sixth consecutive session of gains, reaching its highest level since 2022. The Nasdaq Composite rose by 1.1%, and the Dow Jones Industrial Average surged 1.3%, also closing at its highest since December. Bond prices rose, leading to a decline in yields, despite the Federal Reserve signaling the possibility of two more 25bps rate increases this year. Retail spending data showed a 0.3% increase in May, beating expectations of a 0.2% decline. Energy shares benefited from a 3.4% climb in U.S. crude oil prices, while Chinese stocks also advanced following a rate cut by China's central bank.

DeFi & CeFi

  • iShares, a BlackRock subsidiary, files for Spot Bitcoin ETF
  • USDT depeg concerns arise due to Curve pool imbalance, Tether CTO dismisses as FUD
  • Crypto lender, Abra, found to be insolvent for months, according to state regulators
  • Hong Kong urges major banks HSBC, Standard Chartered to accept crypto exchanges as customers
  • GMX traders suffered historic liquidation loss yesterday
  • Y2K, a stablecoin depeg hedging protocol, surged over 40%
  • Polkadot launches Polkadot OpenGov, a decentralized governance platform managed by the community

BlackRock's iShares unit has filed paperwork with the SEC for a spot Bitcoin ETF called the iShares Bitcoin Trust. The ETF will primarily hold Bitcoin assets kept in custody by Coinbase. BlackRock's significant influence, with over $10 trillion in AUM, may give it an advantage in obtaining SEC approval, which has previously rejected spot Bitcoin ETF applications. The proposed ETF will be benchmarked against the CME CF Bitcoin Reference Rate, providing investors with reliable tracking of the underlying asset's spot price. The move signals growing interest in Bitcoin among major financial institutions.

Meanwhile yesterday, Tether's stablecoin, USDT, de-pegged slightly as the Curve 3Pool became heavily imbalanced, with USDT's weightage rising to over 70%. Traders were selling USDT for DAI or USDC, causing USDT to de-peg to $0.996 in many markets. Tether CTO Paolo Ardoino reassured them that they were prepared to "redeem any amount". Indeed, this imbalance has occurred in the past, with USDT experiencing occasional price discrepancies, but it has never maintained a prolonged depeg. Afterwards, Ardoino highlighted the tense market sentiment and the possibility of direct attacks on Tether.

Also, crypto lender Abra has been deemed insolvent by state securities regulators since at least March 31, 2023, with allegations of misleading the public and committing securities fraud. Regulators claim that Abra held assets worth tens of millions of dollars on now-bankrupt platforms, with "Abra Trade and Respondent Plutus Lending having assets valued at $118,581,732 on Binance.com". Abra founder William Barhydt has not yet commented on the matter. Despite the allegations, Abra is still allowing customers to withdraw funds, and a hearing on the case is yet to be scheduled.

On-Chain

The prices of $CRV fell by 33% between 4 to 14 Jun 2023, reaching $0.57. The Founder of Curve Finance had borrowed $110M in stablecoins against his entire $CRV holdings on AAVE, representing approximately 50% of the circulating supply. This decline put $131M worth of $CRV at risk of liquidation if prices dropped below $0.38. If liquidation occurs, there is a concern regarding the sufficiency of on-chain liquidity to execute a market sell without significantly impacting $CRV prices. This situation also poses a risk for the lending protocol AAVE, which could potentially face bad debt. On a positive note, @santiment reported an 8% price bounce as the funding rate reached deeply negative levels, coinciding with the appearance of extreme shorts on Binance. Historically, extreme funding rates have indicated a reversal of the prevailing trend.

Crypto Derivatives

  • Funding rate on BTC flipped negative, while it remained negative for ETH and other altcoins
  • 30-day ATM IV for BTC rose to 41.12% while it remained flat for ETH at 41.47%
  • Volmex Volatility Index for BTC rose to 50.52% while it fell for ETH to 51.11%
  • 30-day 25-delta skew for both BTC fell to -3.88% while it eased slightly for ETH to -5.41%

Top 3 CEX USDT perp funding rate arbitrage based on last 24-hour lookback:

Net Annualized APR

Perp (USDT pair)

Long on

Short On

43.07%

BNB

Bybit

Binance

30.33%

BTC

OKX

dYdX

16.21%

SOL

Binance

dYdX

Source: @CexyArbBot Telegram

1) Pairs observed include BTC, ETH, SOL, BNB, XRP, LTC, DOGE vs USDT perps 

2) CEX observed include Binance, Bybit, OKX & DYDX

@CexyArbBot allows you to customize CEX, 100+ pairs & lookback periods combo

In the futures market, approximately $65M worth of liquidations occurred yesterday, with the majority of it coming from short liquidations at $37M.

Yesterday, the implied volatility (IV) of BTC experienced a slight increase, whereas the IV of ETH remained unchanged for longer-dated tenors and decreased slightly for shorter-dated tenors. Furthermore, the Bitcoin Volatility Index (BVIV) pushed higher above the 50% handle, while the Ethereum Volatility Index (EVIV) exhibited a slight decline. This deviation implies that the IV of BTC is gradually attempting to surpass the IV of ETH, similar to what we observed in the past few months.

Additionally, the Implied Volatility vs Realized Volatility (IVvRV) metric for both BTC and ETH is currently trading at nearly the same level, suggesting that the Volatility Risk Premium (VRP) is beginning to compress once again.

Elsewhere, skew on both BTC and ETH remains in put territory. Although the put skew on ETH showed a slight easing yesterday, it continued to deepen on BTC.

In terms of market activity, we can observe varied flows on BTC and ETH for different time periods. As reported by @tradeparadigm, notable transactions included the purchase of 750x 23-Jun-2023 24K puts and the purchase of 7,000x 28-Jul-23 1.7K straddles.

Lastly, the VIX rallied to 14.50% as equities pushed higher.

Crypto Technical Analysis

Moving on to Technical Analysis and examining the 4H chart of Bitcoin (BTC) over the past week, a key development is that BTC has broken below the descending triangle pattern observed earlier this week. This pattern is typically indicative of a continuation in the existing downward trend. Currently, the price is hovering around the critical support level at $25K. The RSI, which stands at 45.25, suggests a neutral sentiment in the market. If this support does not hold due to increased selling pressure, we could see a further decline towards the next support level at $24.7K. Conversely, should BTC demonstrate resilience and manage to reverse its trajectory to breach the resistance at $27.3K, it could herald a potential uptrend.

In the 4-hour chart for ETH, a notable occurrence is that the price has breached the crucial support level of $1.7K but seems to be holding steady at the $1.6K support level, indicating a possible pause in the selling pressure. However, if this support fails to hold, the price could potentially drop to the next support level at $1.4K. It's also worth noting the RSI movement - it has shown a rise from yesterday's low of 20.48 to 34.02, indicating some emerging buying pressure or reduced selling momentum.

Keeping a close watch on the ETH/BTC chart, the persistent descending wedge pattern may imply a potential near-term bearish momentum for ETH and other altcoin pairs against BTC. After breaking through the 0.067 support level, ETH is now endeavoring to find support at 0.06. If this level fails to hold, a further slide to the next support at 0.056 might be on the horizon. Notably, the RSI has dropped to a 30-day low of 30.68, indicating a potentially oversold market condition for ETH/BTC. In the past three instances when the RSI reached this low, it was followed by a substantial rally, suggesting the possibility of an upcoming price recovery. Should the price start to rebound and break above the descending wedge, the next major resistance stands at 0.083.

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